NEWPORT BEACH, CA—Entry-level home seekers tend to be more sensitive to interest rates, plus entry-level products are located in very supply-constrained markets that are close to jobs and key amenities, Trumark Homes executives tell GlobeSt.com. According to the firm, as confidence in the housing industry increases, more Millennials are now looking to buy homes instead of rent.

Even more interesting is that in Orange County, entry-level homes are selling at almost double the rate of luxury homes, Trumark says. And despite the rising median home price in Orange County, buyers will still gain more space for their dollar in the suburbs or exurbs: the price per square foot in OC is nearly 60 percent cheaper than that in L.A.

We spoke with Trumark's Southern California division president Richard Douglass and VP of sales and marketing Carola Cherief about why entry-level homes are selling so much faster than luxury homes in this market, who is buying them and what the future looks like for this sector.

GlobeSt.com: Why are entry-level homes selling at almost double the rate of luxury homes in Orange County?

Cherief: Entry-level home seekers tend to be more sensitive to rates. We saw customers make quicker decisions when rates spiked around election time. Buyers seem to have accepted that rates may not decrease to levels we saw just a year or two ago. Lenders are competing with each other to offer niche, low-down payment products to gain more purchase-money business (as opposed to a refi-focused strategy in a climate of declining rates). We're also seeing strong familial encouragement and assistance among buyers. We're observing more down-payment gifting and co-signer scenarios than in years past. Additionally, rents are at very high levels. We have been conducting first-time-buyer seminars in our sales centers to educate potential buyers. Often, instead of parents buying a luxury home for themselves, they're being a little more careful of spending and instead, diverting assets and lending credit to their children.

GlobeSt.com: Who is buying these homes, and what are they looking for in the homes they're buying?

Cherief: We're seeing a steady group of first-time and move-up buyers. Dual income continues to be the norm. We continue to see an increase in employment in the technology field. The same goes for buyers who telecommute. There has also been a steady flow of heath, financial services and government employees. Many prospective buyers seek homes with a downstairs bedroom to accommodate short- and long-term visitors. Homes with small but usable outdoor spaces/porches/balconies are also popular. Our customers are particularly interested in energy efficiency and future technology (electric vehicles, solar power and smart homes).

GlobeSt.com: Is this trend expected to continue? Why or why not?

Douglass: A big reason for this trend is that our entry-level products are located in very supply-constrained markets that are close to jobs and key amenities. I have stated often in this space that we need a much more energetic response from local government in creating a faster track for land-use evolution. The City of Santa Ana worked very closely with us to evolve a derelict land use into a new housing community—and even more importantly, with development standards that support a rational neighborhood design. We were able to create products which people can afford and in which they can thrive. The City of Anaheim just approved an important project for us, and the City in the Platinum Triangle, where we actually decreased density since it just made more sense from a living environment. There is no reason why this trend cannot continue.

GlobeSt.com: What else should our readers know about this trend?

Douglass: We need to evolve our thinking away from the land-use standards—even the nomenclature—of the past. We can create a lot more housing like the neighborhoods that are showing success. Many of the development regulations we have originated decades ago, yet the product we are building is not like the product we built decades ago. Driving patterns are changing. The definition of uses in outdoor space is changing. How we live and evolve as home dwellers also is different in many ways. We need much more flexibility in design. Readers should engage their community leaders and builders on these topics. The chance to do more cutting-edge design is tremendously exciting to us.

The fact is, there is actually no shortage of land. There is a shortage of will and resolve to evolve the obsolete and derelict land uses that dot Orange County. Incentives should be put in place, and cities would see a huge response from builders—including financial consideration—if we would just get out of the patterns of thinking and patterns of design of the past.

GlobeSt.com: Why are entry-level homes selling at almost double the rate of luxury homes in Orange County?

GlobeSt.com: Who is buying these homes, and what are they looking for in the homes they're buying?

GlobeSt.com: Is this trend expected to continue? Why or why not?

GlobeSt.com: What else should our readers know about this trend?

Instant Insights /

Why OC's Entry-Level Homes Are Selling Fast

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